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Flexible Labour, Income Effects, and Asset Prices

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  • Rahul Nath

Abstract

This paper studies how flexible labour decisions affect asset pricing in a Real Business Cycle model. It uses Jaimovich-Rebelo preferences with internal habits in consumption and distinguishes between two income effect channels (i) the ‘habit income effect’ channel and (ii) the ‘separability income effect’ channel. I ï¬ nd that asset prices are superior when the ï¬ rst channel is strong and the second is weak, this is the case of using GHH preferences with internal habits in consumption.

Suggested Citation

  • Rahul Nath, 2018. "Flexible Labour, Income Effects, and Asset Prices," Economics Series Working Papers 851, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:851
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    File URL: https://www.economics.ox.ac.uk/materials/working_papers/4634/rahul-nath-flexible-labour-income-effects-and-asset-prices.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Asset Pricing; Income Effects; Jaimovich-Rebelo Preferences;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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